Whenever you’re working toward a goal, it helps to break up the big picture into a series of smaller steps. This makes the final outcome seem more attainable. Instead of having to make many drastic moves at once, you can focus on one manageable task at a time. One thing leads to another and, before you know it, you find yourself closer to achieving your dreams than ever before.
Taking control of your financial future sounds like a tall order. But breaking it down into four semi-simple steps makes it less daunting. Here’s a framework for assessing your financial health and making savvy choices that bring you closer to your long-term money goals.
Step 1: Get Acquainted with Your Finances
Many consumers have a working knowledge of their day-to-day finances. But the only way to establish a solid starting point is to understand your comprehensive financial situation. This means conducting a thorough audit of your financial products. Here’s what to include:
- Savings accounts
- Checking accounts
- Credit cards (balances and interest rates)
- Loans (student, mortgage, personal, etc.)
- Insurance policies
How does your income look compare to your outflow of expenditures? Are there any areas in which you need to improve to achieve true financial health? Are any of these areas showing signs of neglect—evident by either a lack of capital or an excess of debt? If you have automatic payments set up in any of these areas, could they benefit from any changes?
Sitting down to examine your finances can be intimidating, making it easy to procrastinate. But “ripping off the Band-Aid” usually brings relief because at least you have an honest idea of where to start.
Step 2: Develop a Debt Repayment Plan
It’s hard—if not impossible—to take control of your financial future if you’re still facing significant debt. So, debt repayment is first up on the docket. You may be able to reduce your debt by making lifestyle changes and throwing every extra penny at your debt. If you carry significant debt, you may need a more structured debt relief option. For example, if you’re a candidate for debt settlement, you may be able to work with a company like Freedom Debt Relief to actually negotiate down how much you owe, making repayment more manageable.
At the end of the day, there’s no one-size-fits-all debt repayment solution. Finding the right fit depends on understanding your unique needs and doing plenty of research online before committing.
Step 3: Tighten Your Budget
Even consumers with an already tight budget can usually cut spending in certain areas, freeing up this cash for important goals. What might this look like in action? Well, perhaps you can eliminate an underutilized streaming service or cable package. Preparing meals at the beginning of the week will help you avoid the temptation to grab convenient-yet-pricey meals away from home. You may be able to carpool to work, take advantage of public transportation or consolidate your trips to cut down on vehicle gas and maintenance.
The point is: It’s very rare to have a completely airtight budget. There’s almost always something you can reduce to free up additional money. Treat it like a puzzle; that way, you’ll feel the satisfaction of figuring it out.
Step 4: Ramp Up Your Savings Efforts
It’s impossible to plan for your financial future without considering two things: retirement and emergencies. The three previous steps will help you reallocate more of your income to beefing up your 401k and emergency fund. You’ll be able to rest easier knowing you’re protected in case of an unexpected expense. And, although retirement may feel far away now, your future self will thank your present self for taking initiative.
Use these four semi-simple steps to take control of your financial future.